UAE banks are in a strong position to recommence lending to Real Estate investors according to Mr. Mohanad Al Wadiya, Managing Director of Harbor Real Estate Brokerage and Editor in Chief of the Harbor Report.
According to the quarterly Harbor Report, which will be issued at the end of this month, the economic crisis has forced banks to shore up their capital to the extent that now, according to the UAE Central Bank, capital in UAE Banks in May topped AED 200 billion.
"This has been primarily achieved by offering higher interest rates for savers and taking a more conservative approach to lending," said Mr. Mohanad Al Wadiya, Managing Director of Harbor Real Estate Brokerage and Editor-in-Chief of the Harbor Report. "It will no doubt pave the way to a solid and secure banking sector in the UAE and help the country recover from the economic crisis," he added.
The report also touches upon the reasons behind the drastic decrease in credit availability, signs that liquidity is starting to slowly flow into markets, the importance of the implementation of Credit Information Law as well as highlighting the fact that banks now have an overly conservative attitude towards adopting risk.
"Globally and locally, there have been signs that liquidity is starting to flow into markets. However, the pace at which it is flowing is causing a great deal of frustration amongst real estate investors as well as aspiring owners. Not only has Eibor (Emirates Interbank Offered Rate) dropped from a peak of 4.78% in November 2008 to 2.46% in the second quarter of 2009 but many banks are now preserving relatively low loan to deposit ratios," Mr. Mohanad Al Wadiya added.
The report also goes on to discuss that despite a low appetite for risk, liquidity must start flowing soon and that a well regulated credit agency can certainly help mitigate the risk involved in credit transactions and aid in the country's recovery.
"The implementation of Credit Information Law is viewed as a positive step towards transparency and risk mitigation for banks," added Mr. Mohanad Al Wadiya. "This law will create a framework of rights and obligations for data providers, information users and individuals alike,'' he concluded.
The positive effects which flow from this type of information sharing facility are significant. The transparency into an individual's credit history will benefit banks and individuals alike with faster decision making, greater risk mitigation and less bureaucracy. The introduction of the credit information law signifies a positive move towards a mature, stable and efficient financial sector. The Real Estate industry will benefit greatly from this initiative as it too moves towards maturation.
The Harbor Report will be available online from the end of July and can be downloaded from the Harbor Real Estate Brokerage website http://harbordubai.com/harborreport/
Source: Property World ME